‘Victimless’ Crimes That Hurt Us All

Despite efforts to curb insurance fraud in this country, many Americans believe it is acceptable to “pad” claims or otherwise defraud insurers, recent industry surveys have reported.

About 9% of those surveyed by Progressive Insurance this spring said they would commit insurance fraud if they thought they could get away with it, said Tom Kaschalk, the company’s top fraud investigator.

Some 36% of respondents to a February survey by the Insurance Information Institute said it is acceptable to overstate insurance claims, and 40% believe it is OK to do so to make up for the insurance deductibles they have to pay.

Such cavalier attitudes are on the increase, said Stephanie Macadaan, a spokeswoman for the Insurance Information Network of California, an industry-funded research group. Insurance fraud ranks as the second-costliest white-collar crime in the United States after tax evasion, Macadaan said, referring to estimates of $100 billion annually.

Auto insurance fraud accounts for about $20 billion of that total, Kaschalk said.

So who foots the bill? Law-abiding consumers.

Fraud costs add $200 to $300 a year to the typical consumer’s insurance premiums, the National Insurance Crime Bureau estimates.

“Consumers should be outraged by insurance fraud,” Kaschalk said. “Would you be angry if a friend took $300 from you and bought a new TV, or took your ATM card to fund a Friday night out?”

Staged auto accidents, auto repair fraud and false claims of injury or damages are among the most common scams, according to the Arlington, Va.-based insurance crime bureau.

In border states such as California, false reports of stolen vehicles have increased. Insurance investigators recover reportedly stolen vehicles in Mexico, Kaschalk said, and “many times there are no signs of theft, and we discover that the owners had been involved in giving someone the keys to drive it over the border.”

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Why do otherwise law-abiding people--who wouldn’t dare shoplift, for example--engage in insurance fraud?

“People view it as a victimless crime. They see their insurance company as a faceless entity,” Kaschalk said.

Some people figure they pay insurance premiums for years, and unless they have an accident, they never see anything in return, he said. They figure they can recoup some of that money by padding an insurance claim or falsely reporting that their vehicle has been stolen. It becomes “a vicious cycle” because fraud leads to higher premiums, Kaschalk said.

Progressive, based in Cleveland, conducted a national telephone survey of 31,000 people. About 29% of respondents said they would never report insurance fraud committed by someone they know. That number would drop, Progressive found, if respondents were offered rewards for reporting fraud. Interestingly, 6% said they would report insurance fraud only if they didn’t like the person who had committed it.

It wasn’t only insurance fraud that respondents deemed acceptable. About 13% told Progressive they would steal cable television or inflate their accomplishments on a resume; 12% would park illegally in a space designated for handicapped drivers; 9% would drive through a tollbooth without paying; and 7% would cheat on their taxes if they knew they wouldn’t be caught.

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The rise in organized insurance fraud is even more worrisome to industry representatives.

“Some insurance crimes are elaborately planned, involving organized fraud rings including dishonest doctors and lawyers and unscrupulous auto repair shop operators,” said Robert M. Bryant, chief executive of the National Insurance Crime Bureau, a nonprofit group funded by insurance companies to fight fraud and vehicle theft.

Staged auto accidents, in which owners of both vehicles conspire to falsify claims of personal injury and vehicle damage, also are on the increase.

Just last month, 67 people, including two police officers and three other law enforcement employees, were indicted by federal prosecutors in New York for allegedly staging automobile accidents to collect on lawsuits and medical insurance claims.

Whether it is organized fraud or a neighbor trying to make extra money on a claim, Bryant warns that insurance crimes cost all consumers and can jeopardize public safety.

Jeanne Wright cannot answer mail personally but responds in this column to automotive questions of general interest. Write to Your Wheels, Business Section,

Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012. E-mail: jeanrite@aol.com.